China Expected to Reduce Output of Nickel

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Bloomberg reported that the price of nickel saw a sharp jump in price on Wednesday after five months of lengthy declines. China’s inventory is already tight, and they plan to reduce their output further in favor of cheaper alternatives. Speculation about what China will do and the low stockpiles currently available are responsible for the commodity price spike.

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China is the world’s top producer of nickel pig iron, an important component in the production of steel. If the price of nickel remains high, the steel industry will suffer around the world. China has stockpiles of 378,864 tons of nickel. This is a significant decline from the availability in 2013. The Financial Times reports the stockpile levels are down by 17 percent. And, since analysts predict China will soon focus on new industrial metals, the stockpiles will stay low and keep prices high.

Nickel increased 5.1 percent on the London Metal Exchange this week to $15,545 a metric ton. The lowest it has been this year is $14,690 in March. Nickel has been in a bear market (prices lower than 20 percent of their most recent peak) and Goldman Sachs predicts the current price of nickel will balance the market.

The price of nickel is expected to stay high for a while, especially since the Philippines’ monsoon season is approaching, which affects China’s imports. The price will probably even rise as the weather disruptions cause nickel supplies to tighten. There probably won’t be a turning point until February next year when production typically ramps up.

It’s interesting that this is not the first time this year when nickel prices surged. It also happened when there was a ban on Indonesian ore, which is very important to China’s steel production industry. However, the Philippines helped relieve those short-lived supply fears. [/show_to]

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